The overall economics or viability of a refinery depends on the interaction of three key elements: the choice of crude oil used, called the crude slate, the refinery configuration, and the desired type and quality of products produced, called the product slate. In current practice, assumptions are made regarding the crude oil slates, and the value of that slate is determined based on the desired product slate.
Assumptions regarding the crude oil slate are based on many factors. Predominantly, the perceived value is based on historical knowledge of a slate. Lab tests are run and data is collected when a slate is run through a refinery distillation tower. These data points are correlated to relative density, also expressed as API Gravity (in degrees), which are the only metrics that can currently be accurately measured in the field.
The new diversity in the domestic supply of hydrocarbon fluids driven by, among other things, the fracking revolution has introduced a much higher degree of uncertainty in the market. For example, a new fluid from a previously unproduced formation having an API Gravity of 58° may yield a comparable amount of kerosene as a traditional product with an API Gravity of 42°. In addition, new drilling and production methodologies are constantly bringing previously unseen hydrocarbon slates to the market and the traditional methods of valuation of these slates are no longer as reliable as they once were.
In addition to the increased diversity in production sources, the supply dynamics have greatly changed with the increase in domestic supply. A much larger portion of a refinery's throughput is delivered via common pipeline infrastructure as opposed to large vessels, as was historically the case. This allows much more opportunity for blending discrete products together and adds uncertainty of the quality of a product due to the lack of visibility past a relative density proxy. For example, a supplier could blend a very light product with a very heavy product, both of which trade at a large discounts to established benchmarks, and sell it as a benchmark grade product. However, this type of blended product slate may not yield the valuable product slate the refiner believes it is purchasing.
Pricing structures are setup to float with a market based commodity benchmark, such as West Texas Intermediate (“WTI”) or Brent. These benchmarks have certain quality standard qualifiers such as Total Acid Number (“TAN”), API Gravity range, maximum allowable water, and solids content. Any excess in contaminates or deviation from the allowable API Gravity results in pricing deductions. For example, an API Gravity number that is 2 degrees higher than the allowable benchmark could result in a $0.75 per barrel penalty to the producer. Condensates tend to be much lighter fluids and can have significant deviations from the posted benchmark values.
There is a need, therefore, for a spectroscopic analysis in the field that can provide visibility into the fractional distillation characteristics of a crude slate in real time. The distillation characteristics would allow the refinery to determine the products that may be made from the slate.
Traders and planners could utilize the information from the field to make much better purchasing and valuation decisions. For example, the refinery plan may call for a certain number of gallons of jet fuel to be produced. The purchasing agents could look at the available supply's distillation yield characteristics and buy the most efficient material, or combination of materials to ensure optimal yields. In fact, they would pay a premium to ensure they met the quotas set out in the plan to maximize profitability.